India’s Plan For A Shipowners’ Insurance Club Is Stuck At Sea, Here’s Why

Over a year ago, finance minister Nirmala Sitharaman floated the idea of India setting up its own Protection and Indemnity (P&I) club — essentially, an insurance fund for shipowners, created and owned by shipowners themselves. It sounded like a logical next step for a country with maritime ambitions. Nations like the UK, China, Japan, and Iran already operate their own P&I clubs. Why not India?

On October 19, 2023, speaking at the Global Maritime India Summit in Mumbai, Sitharaman had said:

“A need has been felt to have a full‑fledged India-owned and India‑based P&I entity… It would reduce India’s vulnerability to international sanctions and pressures to provide greater strategic flexibility in shipping operations.”

That statement marked the first official push towards building a domestic P&I ecosystem — an idea that received initial nods of approval from policymakers and industry veterans alike. But fast forward to today, and very little has moved on the ground.

Not only is there no roadmap, but even core stakeholders — India’s Directorate General of Shipping and leading shipowners — don’t seem to have a clear understanding of how such a club would actually function.

“There have been some initial discussions and recommendations sent to the government. But operational clarity? That's still missing,” Anil Devli, CEO of the INSA, told The Core.

What’s A P&I Club?

A P&I club is not a typical insurance company. It’s a collective of shipowners who pool money into a shared fund, technically not called a premium, but a membership fee. That fund is used to cover liabilities when incidents happen, such as oil spills, collisions, cargo damage, and injury claims.

“The membership fee for the following year is adjusted based on the claims made; if incidents are fewer, the fee may drop,” a source from DG Shipping told The Core on condition of anonymity.

This is different from standard marine insurance. In traditional models, insurers collect premiums, reinsure large risks and invest the remaining funds to grow a corpus. P&I clubs, on the other hand, work on a mutual model. All members contribute and share the risk. And when a claim arises, it’s the pooled money that foots the bill.

Global shipping tonnage, or the carrying capacity, of the world’s entire commercial fleet exceeds 2.2 billion deadweight tonnes (DWT). In contrast, India’s share of about 13 million gross tonnes is relatively small, amounting to roughly 1.5% of global tonnage.

The International Group (IG) of P&I Clubs, which comprises 12 mutual clubs, provides liability cover for nearly 90% of global tonnage. This means that most ocean-going vessels, regardless of ownership, are insured under IG-affiliated clubs.

Indian shipowners, too, rely on these international clubs — mainly based in London or Europe — for their P&I cover, as India currently lacks a recognised domestic alternative. This gives Indian shipowners access to global reinsurance pools and legal networks, which would be difficult to replicate locally at present.

It’s cooperative, self-regulating, and built on trust. But there’s a catch: for such a system to work, you need a strong, experienced shipping base, financial depth and solid legal infrastructure.

India, unfortunately, doesn’t quite tick those boxes.

“We don’t yet have a strong ship-owning base, so talk of a P&I club might be a bit early. But it’s still a good step — at some point, you have to start building. Even if we’re not fully ready, laying the foundation now is worthwhile,” Captain SP Rath, managing director of Econship Marine, Singapore, told The Core.

India’s Gap

India automatically recognises all clubs that are part of the International Group (IG) of P&I Clubs, since they meet certain global standards. These clubs are accredited by default.

At the end of the day, every shipowner must be part of a P&I club as long as it’s recognised by the Government of India.

“If any other P&I club—especially a new or homegrown one—wants recognition under the Indian flag, it must go through a benchmarking process. This includes submitting documents that show how they’ve handled claims in the past, the size of their membership pool, and other key indicators of financial strength and reliability,” the source from DG Shipping said.

Once a domestic P&I club is officially recognised by India, it can become a viable option for small or mid-sized shipowners who want coverage aligned with their risk profile and business needs.

According to the DG Shipping, the idea of forming a domestic P&I club stems from the need for sovereignty and control.

The Role of Government—and Its Limits

There’s a common misconception that the government should create or fund the P&I Club. But officials say that’s not the government’s job.

Claims are meant to cover liabilities, but who imposes those liabilities? It’s the sovereign, meaning a country like India.

The sovereign has three key roles:

• Impose liability – for example, in the case of oil spills or wage disputes.
• Ensure enforcement - through legal or regulatory mechanisms.
• Assess financial capacity – ensuring the insurer (or P&I club) can pay the claim.

“The government shouldn’t be involved in creating the compensation fund using public money because the risk arises from the nature of the shipping trade itself. And it’s the trade that should bear that risk,” the source from DG Shipping said.

While the government can help create the legal and institutional framework, the funding and management of a P&I club must come from the industry itself.

Who would decide on the amount for pooling the money, and how will the risk be covered?

“A P&I Club works by shipowners pooling membership fees to cover risks within the industry. There’s no premium, no reinsurance, no investment for returns—just mutual risk-sharing,” DG shipping source added.

A Clash of Understanding - A Legal Hurdle

According to the Indian National Shipowners’ Association (INSA), the idea of the P&I club in India will be that the shipowners pool resources and share risk collectively, without relying on traditional insurance models. An insurance company might cover claims up to a certain threshold.

But beyond that, if a massive loss occurs, the additional burden is shared among the club members themselves. So if 100 shipowners are part of the club, and a loss exceeds the insurer’s cap, those 100 members split the extra cost.

At the heart of the issue is mutuality—This mutual model is the foundation of international P&I clubs, but in India, it’s illegal.

“Mutuality in insurance is not permitted under the current Indian law. There are concerns over potential misrepresentation, weak oversight, and a lack of financial transparency,” Devli said.

And he's not wrong. A mutual P&I club requires rigorous checks: strict financial rules, regulatory supervision, verified member contributions, and strong governance frameworks. India doesn’t yet have the legal or institutional mechanisms to support that.

But Devli also cautions against assuming the mutual model is the only path forward.

“Just because the global clubs use mutuality doesn’t mean we have to replicate it. The goal should be to first understand how losses happen in shipping and how insurance can help mitigate those risks. That’s where we should begin.”

To make a mutual P&I club legal, India would have to amend its insurance laws and create a strong compliance framework with tight financial reporting, independent audits, and regulatory supervision.

And right now, that kind of oversight system just doesn’t exist.

“So many questions come up if they are talking about shipowners getting together and forming the club. First, they have to amend the law because the law doesn’t allow mutuality in insurance,” Devli said.

Underwriting, Capital, and Other Expertise: All Missing

Even if India legalised mutuality, another problem remains: underwriting capability.

Underwriting is the core of insurance. It’s the ability to assess risk, predict future losses, and price contributions accurately. But that requires decades—if not centuries—of data, and skilled actuaries who know how to use it.

“Our current insurance companies (foreign companies) have data of as much as 100, 150 years,” Devli explained. “And it’s based on when they arrive and what the claims ratio is. So all of that needs to be generated in India.”

India has neither the data nor the experience.

Then there’s the question of capital. Most P&I clubs cover liabilities up to $500 million, sometimes more. That kind of coverage requires a deep financial base and strong reinsurance.

“Who will reinsure the risk in India? Nobody. New India Assurance just goes back to London anyway—so why not go there directly,” Rath said.

Even if a domestic P&I Club were formed, it would still need to reinsure risks abroad, adding another layer of cost and complexity.

The Elephant in the Room: India’s Weak Shipping Base

Perhaps the most significant barrier is this: India doesn’t have a large enough shipping fleet to support a viable P&I Club.

The Indian shipping industry is small, fragmented, and declining in influence. Many domestic companies have flagged out their vessels to foreign registries to take advantage of easier regulations and tax structures. Even large players like Great Eastern Shipping Company have only a few Indian-flagged ships left.

“India doesn’t have that many ships. Not all the shipping companies are so big. So, how are they going to cover the risks?” Rath said.

Cabotage restrictions have also stunted the growth of coastal shipping. While there are efforts to revive inland waterways and boost short-sea shipping, it’s still early days.

A Smarter Way Forward: Start Small, Learn Fast

Despite all this, the industry isn’t dismissing the idea outright. Instead, they’re recommending a cautious, phased approach.

“We have given our recommendation to the government to start with small ships, for example, inland waterways and vessels working on the near coast. This will help learn from that experience, and then keep advancing—inch by inch—into the larger ships,” Devli said.

This model would allow India to build a data pool, train underwriters, test enforcement systems, and slowly develop a domestic insurance ecosystem.

Also, the idea isn’t just to replicate what London does. It’s to build something that fits India’s realities.

“Just because somebody follows the mutual model doesn’t mean that’s the best model. The idea should be to gain experience in understanding how loss happens in shipping and how to provide various services,” Devli added.